Time-Driven Activity-Based Costing by Robert Kaplan. Harvard Business Publishing

Using Regression Analysis to Estimate Time Equations (by F. Asis Martinez-Jerez; Ariel Andres Blumenkranc)

Case: Kemps LLC

1. How do the differences between conventional ABC and TDABC matter to Kemps business?

2. Use the production run-time equation on p. 5 to estimate the time required for the following sour cream orders: (a) 1,000 24-oz. containers, (b) 500 24-oz containers and 500 12-oz. containers. Order (b) requires a size change and a label change; order (a) requires neither.

3. Suppose that warehouse activity time consists of loading and moving activities. Warehousing costs are $100,000 per month. Last month there were 30,000 minutes of loading activity and 70,000 minutes of moving activity. This month there were again 30,000 minutes of loading activity, but 55,000 minutes of moving activity. Given the way Kemps does its estimates, will this months reported cost per minute of loading be the same as last months, or higher or lower?

4. Identify key strengths and weaknesses of the Kemps ABC system and its implementation process.